House prices: is the ground beginning to shift at last?

We’re seeing the first cracks in a housing policy both parties have supported for too long.

Every few years the opposition discovers the problem of housing affordability. For now, it is Labor fuming relentlessly about how "out of touch" Joe Hockey is for suggesting the apparent solution to soaring house prices is a better job. But Hockey was once in opposition himself, and back then he threw similar barbs. "(Treasurer Wayne) Swan must explain why housing is more (affordable) when Melb prices rose 20% last yr", he tweeted in 2010. "The biggest challenge is housing affordability over the next few years", he reiterated a few months later, on the eve of an election. He was right, of course. Even if he now disagrees with himself.

That's the cycle. Oppositions thunder about house prices, form government, watch it get worse, then go back to opposition, where they thunder all over again. Rudd did it to Howard. Abbott did it to Rudd and Gillard. Now Shorten is doing it to Abbott. There's a reason it's like this: behind all the heat, anger and politicking, we've had a raging consensus on policy that dramatically privileges the interests of those who own property over those who don't.

It has been this way for at least 15 years, and it's the product of a worldview that means the only solutions you can find are the kind Hockey has offered. Yes, this was a gaffe. But let's be clear: Hockey's was a crime of politics, and if you're the Labor Party, not of policy. The bare fact is that housing is unaffordable because the market is flooded with investors. Fewer than half of our houses are owned by people living in them. About 30 years ago that figure was around 85 per cent. And if we're honest, that's exactly what both parties have been aiming for, given the way our tax system works.

If you're a high-income earner, you have a choice: you can either pay half your earnings in tax, or, thanks to concessions on things like negative gearing and capital gains tax, you can put it into property and pay about a quarter. The result, put crudely, is rich people buying houses they don't particularly want, but which poorer people want to live in. Naturally, the wealthy can afford to pay a bit more for them, so the price goes up. And since both sides of politics are determined to make sure house prices keep going up, investors take minimal risk and first-home seekers have increasingly minimal hope.

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Illustration: Simon Letch.

But think about what this worldview is telling you. It says work is worth less than investment, which is why it's taxed higher. And that, of course, is an option only open to the fortunate. That is the true significance of Hockey's words. They merely disclose the assumption on which this bipartisan system is based: that all this could be yours, if only you try hard enough.

It's a myth, of course. Indeed, there are several reasons Hockey's claims collapse. First, that if everyone could somehow heed his advice and get a well-salaried job, that would simply swamp the housing market with cash, driving prices up even faster and rendering our shiny new jobs suddenly and hopelessly inadequate. And second, that this is a government that just last year was fretting out "something akin" to a "wages explosion" even as our wages are growing at the slowest rate since the ABS started keeping the data. The last thing it seems to want is for us to get higher-paid jobs.

But myths are inevitable when you transform the free market from an economic arrangement into a political philosophy. You wind up assuming opportunity is more or less equal, that individuals control their respective fates, and that empowering the wealthy to increase their wealth will, by some abstract mechanism, enrich us all. Thus, you pretend the market simply redistributes power and wealth according to talent and effort, and doesn't also concentrate these things among those who start with an advantage. In the case of housing, that means older people who were able to enter the market before it raced out of reach.

We're apparently determined to be blind to this. Partly that's because property owners represent a seriously powerful bloc of votes, making their interests approximately sacred. But it's also because to see this would cause a consensus worldview to crumble. That's why Hockey's present solution – to increase "supply" by building more houses – is exactly the same as his predecessor's. It's a good idea, but it's far from complete because it can't guarantee investors wouldn't snap up these extra dwellings as well, and the current construction boom (including record numbers of residential building approvals) hasn't yet solved the problem. It dominates, though, because it's politically and ideologically painless. It is the solution that preserves our market-based dogma.

It's one thing to preserve a mythology in ordinary times. But what if our times are becoming rapidly less ordinary? We're now witnessing a generation of Australians on the verge of realising they might never own a home. We've never seen that before. And with it we're witnessing the slow death of an idea: that the free-marketeer's great loves – investment and capital – do not automatically improve everyone's lot. That's why criticisms of negative gearing are working their way into mainstream conversation in a way unthinkable only a year ago. It's why the Greens this week launched a policy to wind it back, and Labor, which spent six years in power steadfastly refusing to do the same – choosing instead to roll out a suite of profoundly ineffective policies – has now said it is considering it.

The Coalition, given its own ideological convictions, will naturally be the last to rethink this. But there is something telling that an actual, fundamental difference on housing policy might be emerging as an electoral battleground. Whatever the short-term result, that's a serious shift. It can be hard to see that shift beyond the gaffes and the breathless, populist ranting that seem so familiar and occupy us so pointlessly. But it's worth looking if you can, because our politics might be being remade before our eyes.

Waleed Aly is a Fairfax Media columnist and winner of the 2014 Walkley award for best columnist. He also lectures in politics at Monash University.